"Sales Returns and Allowances" are reported as
A) an expense.
B) a deduction from Sales Revenue.
C) a deduction from Accounts Receivable.
D) an addition to Accounts Receivable.

Question

Quizplus · Accepted Answer

Sales Returns and Allowances are deducted from Sales Revenue because they represent the reduction in revenue due to returned merchandise or discounts given to customers for damaged or defective goods. They are not considered as an expense because they are not related to the cost of goods sold or operating expenses. Additionally, they are not added to Accounts Receivable because they represent a reduction in the amount owed by customers, not an increase.

"Sales Returns and Allowances" Are Reported as